Gst on labour charges

This query is : Resolved

ch sathwik (Querist)
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17 July 2017 Sir,

We carring Works Contract Business

We pay the Labour Charges to 3 Members on behalf of all labour ( Account Transfer) not Morethen 4,00,000
on that Labour Charges GST Liable to pay or Not ?

and whether labour charges are Shown in GST Return or not ?

What is the Rate of GST for Labour Charges

Thanking you

CA Pradeep Sharma

CA Pradeep Sharma (Expert)
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17 July 2017 Labour charges is the part of value for calculated gst............. hence GST applicable on labour charges by added the same in cost .........rate of work contract @18%

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Trinadharao Adigarla

Trinadharao Adigarla (Expert)
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17 July 2017 GST Applicable on Labour Charges 18% .GST Paid on Reverecharge Basis

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ch sathwik

ch sathwik (Querist)
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20 July 2017 Thank you sir
What is SAC Code for Labour Charges and Sub-Contract (Labour)

Can I tale input on Revers charges

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 The SAC (Services Accounting Code) for labor charges and subcontracting services, along with input tax credit (ITC) implications, can be nuanced under GST. Here's a detailed explanation:

### 1. **SAC Code for Labour Charges and Sub-Contracting Services**

**SAC Code for Labour Charges:**
- **SAC Code:** The SAC code for labor services can vary depending on the specific nature of the service provided. Generally:
- **SAC Code 9985:** This code is used for "Maintenance and Repair Services" and includes labor charges related to repair and maintenance.
- **SAC Code 9987:** This code covers "Construction and Works Contract Services" and includes labor charges related to construction and civil works.

**SAC Code for Sub-Contracting (Labour):**
- **SAC Code:** For sub-contracting services that involve labor, the applicable SAC code is usually:
- **SAC Code 9954:** This code covers "Support Services" related to labor and can be relevant for labor subcontracting services.

### 2. **Input Tax Credit (ITC) and Reverse Charge Mechanism (RCM)**

**Input Tax Credit (ITC):**
- **Eligibility for ITC:** You can generally claim ITC on services used for business purposes. This includes labor charges and subcontracting services, provided they are used in the course of business and are not specifically excluded under GST provisions.

**Reverse Charge Mechanism (RCM):**
- **Applicability:** Under the reverse charge mechanism, the recipient of certain services is liable to pay GST instead of the supplier. For labor services and subcontracting:
- **RCM on Labour:** If you receive labor services from an unregistered supplier, you might need to pay GST under RCM.
- **SAC Code 9985 and 9987:** In case the service is subject to RCM, GST needs to be paid by the recipient based on the applicable rate for these SAC codes. The recipient can claim ITC on this GST paid under RCM.

**Conditions for Claiming ITC on RCM:**
- **Valid Invoice:** Ensure you receive a valid invoice or debit note for the services, including GST details.
- **Payment of GST:** The GST under RCM should be paid and reported in your GST returns.
- **Utilization:** Ensure that the services are used for business purposes to be eligible for ITC.

### 3. **Practical Steps for Claiming ITC on RCM:**

1. **Verification of SAC Code:** Confirm the SAC code used for labor and subcontracting services based on your specific service description.

2. **Payment of GST Under RCM:**
- If the service is under RCM, pay GST as per the applicable SAC code.
- Report the GST paid under RCM in your GST returns, specifically in GSTR-3B and GSTR-2.

3. **Claiming ITC:**
- Ensure you have a valid tax invoice or debit note.
- Claim ITC for the GST paid under RCM in your GST returns.

### Summary

1. **SAC Codes:**
- **Labor Charges:** SAC codes like 9985 and 9987 may apply.
- **Sub-Contracting (Labor):** SAC Code 9954 is often used.

2. **ITC on RCM:**
- You can claim ITC on GST paid under RCM for labor and subcontracting services, provided the services are used for business purposes and you have valid documentation.

3. **RCM Compliance:**
- Ensure GST is paid under RCM and reported in your GST returns for claiming ITC.

For precise classification and tax treatment based on the nature of your services and any recent updates in GST laws, consulting with a GST professional or tax advisor is recommended.